From the Times of India:
Doomsday warnings of US apocalypse gain ground
Economists peddling dire warnings that the world's number one economy is on the brink of collapse, amid high rates of unemployment and a spiraling public deficit, are flourishing.Here's the article in the IMF's Finance & Development review for September, 2010:
The guru of this doomsday line of thinking may be economist Nouriel Roubini, thrust into the forefront after predicting the chaos wrought by the subprime mortgage crisis and the collapse of the housing bubble.
"The US has run out of bullets," Roubini told an economic forum in Italy earlier this month. "Any shock at this point can tip you back into recession."
But other economists, who have so far stayed out of the media limelight, are also proselytizing nightmarish visions of the future.
Boston University professor Laurence Kotlikoff, who warned as far back as the 1980s of the dangers of a public deficit, lent credence to such dark predictions in an International Monetary Fund publication last week.
He unveiled a doomsday scenario -- which many dismiss as pure fantasy -- of an economic clash between superpowers the United States and China, which holds more than 843 billion dollars of US Treasury bonds.
"A minor trade dispute between the United States and China could make some people think that other people are going to sell US treasury bonds," he wrote in the IMF's Finance & Development review.
"That belief, coupled with major concern about inflation, could lead to a sell-off of government bonds that causes the public to withdraw their bank deposits and buy durable goods."
Kotlikoff warned such a move would spark a run on banks and money market funds as well as insurance companies as policy holders cash in their surrender values.
"In a short period of time, the Federal Reserve would have to print trillions of dollars to cover its explicit and implicit guarantees. All that new money could produce strong inflation, perhaps hyperinflation," he said....MORE
A Hidden Fiscal Crisis
EVEN as the United States experiences continuing fallout from a terrible financial crisis, a more alarming fiscal problem looms. The world’s largest economy faces a daunting combination of high and rising costs for health care and pension benefits and constrained sources of revenue that will put enormous pressure on its fiscal soundness.So far, the markets seem to be focusing on U.S. official government debt relative to its gross domestic product (GDP). That number stands at 60 percent, roughly half that, say, of beleaguered Greece. Consequently, the financial wolves are circling Greece, not the United States—driving up yields on Greek securities and driving down yields on U.S. treasury securities....MORE